EDITORIAL: Sale of First Niagara Would Be a Blow to Western New York
October 12, 2015 (Buffalo News (NY)) It may be inevitable, but the possible sale of First Niagara Bank will almost certainly be of no help to the bank's employees or its home community of Western New York. The only real benefit might be to the bank's stockholders and, for better or worse, they comprise the interest that counts for a publicly traded company.
It may be inevitable, but the possible sale of First Niagara Bank will almost certainly be of no help to the bank's employees or its home community of Western New York. The only real benefit might be to the bank's stockholders and, for better or worse, they comprise the interest that counts for a publicly traded company.
Analysts believe that First Niagara is underperforming financially, spread thin by a series of acquisitions a few years ago. It has struggled to increase its stock price -- the coin of the realm for shareholders -- leading to reports that the bank's board has asked JPMorgan Chase to help with a possible sale of the institution.
The price for Western New York would be high. The area boasts few corporate headquarters and a sale would very likely result in a move of First Niagara's headquarters. The region's First Niagara locations would thus become the outposts of a distant company.
In addition, the bank employs 2,300 people in Western New York, including 750 at its headquarters in Larkinville. A sale would inevitably put some of those jobs at risk. Branches might close or other efficiencies might be sought to maximize profits by a new owner. Beyond those jobs is another benefit of having a corporate headquarters here: First Niagara donates millions of dollars in its home region.
First Niagara knows what could happen after a sale, because it has been in the other seat. When the company acquired Great Lakes Bancorp, the parent company of Greater Buffalo Savings Bank, in 2008, it offered jobs to just less than half of Greater Buffalo's 224 employees. It also closed or consolidated six Greater Buffalo branches. It has to hurt.
The problem for Western New York may be unsolvable. The bank's board of directors has a legal, fiduciary obligation to the company's stockholders. After the acquisitions of recent years, only one board member is from this area, the bank's president and CEO, Gary M. Crosby. Others, who joined as a result of First Niagara's acquisitions, are from locations including Connecticut and the Finger Lakes region. The board chairman, Nathaniel D. Woodson, is from Connecticut.
As a financial decision, it might make no difference if all directors were from this region, but it could wield at least some kind of influence. As Fred Floss, an economist at SUNY Buffalo State, observed, directors from other areas evaluate big changes with a more dispassionate mindset: "You don't think of any of the other issues. You don't think of any of the problems that may or may not occur."
A few more Western New Yorkers on the board would be at least a little more comforting, under what looks like difficult circumstances. The question is: What bank has the muscle to purchase a bank as large as First Niagara, which has 390 branches across New York, Pennsylvania, Massachusetts and Connecticut? It has $39 billion in assets and, despite its troubles in capitalizing on its acquisition, boasts a solid deposit base that could make it attractive to suitors.
Four names crop up, though one of them -- KeyCorp -- already does business in this area and might not realize adequate benefit from a purchase. The others are New York Community Bancorp, Huntington Bancshares and TD Bank, a new Jersey-based subsidiary of Toronto-Dominion Bank of Canada. Western New York would still retain the headquarters of its biggest home-grown bank, M&T, and that is of some solace to the community. But the loss of First Niagara would be an unhappy blow, indeed.